How Often Should I Pay My Credit Card?

While the standard practice in Singapore is to settle your credit card bill upon receiving the monthly statement, making multiple payments throughout the month can offer several benefits. This approach can help reduce interest charges, improve your credit score, and streamline debt management. However, there are also situations where frequent payments may not be necessary.

Let’s explore when and how often you should pay your credit card bill in Singapore.

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In Singapore, credit card billing cycles follow a monthly pattern, with a stated due date on your statement. While DBS, UOB, and OCBC allow multiple payments within a cycle, processing times and impacts on available credit differ. Checking your bank's specific policies is advisable.

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In Singapore, credit card interest is typically compounded daily, meaning that the interest charged is calculated on your average daily balance throughout the billing cycle. This daily compounding effect underscores the importance of minimising your balance as frequently as possible to reduce overall interest costs.

If you pay your credit card balance in full before the due date, you won't be charged interest, whether you make multiple smaller payments or one big payment. However, if you're carrying a balance from month to month, making multiple payments before your statement closing date can help lower your average daily balance, which reduces interest. For example, if you often have a balance and pay S$200 a few times before your statement closes, you'll likely pay less interest than if you just made one big S$600 payment on the due date. But, if you make payments after your statement closes, they'll only affect your next month's bill.

Banks like DBS encourage early payments to avoid finance/interest charges. For example, if your statement date is 3rd May, your payment due date is generally 25 calendar days later, 28th May. While the minimum payment is due then, paying the full amount before the next statement date, 3rd June, is recommended to prevent interest. Notably, DBS adjusts due dates falling on weekends or public holidays to the next working day, and late fees of up to S$100 apply if the minimum payment isn't met.

Thus, frequent payments help maintain a low daily balance, reducing interest and saving you money.

>> MORE: How does credit card interest work?

Making early credit card payments lowers your next statement balance and positively impacts your credit utilisation ratio. By paying down your balance before the statement closing date, you reduce the outstanding amount reflected on your upcoming statement, which is crucial for maintaining a healthy credit score.

Bank policies:

• DBS: DBS allows early payments to reduce the balance reflected on the next statement and provides a 25-day interest-free period from the statement date.

• UOB: UOB allows early payments to reduce the balance reflected on the next statement and provides up to a 21-day interest-free period from the statement date if the outstanding balance is paid in full.

• OCBC: OCBC allows early payments to reduce the balance reflected on the next statement and provides a 23-day interest-free period from the statement date.

Early payments lower your average daily balance, reducing interest. While they lower your statement balance, statement and due dates remain unchanged. This strategy is particularly beneficial for those who wish to keep their credit utilisation low and manage their interest expenses effectively.

Many Singaporeans find it advantageous to synchronise their credit card payments with their salary deposits, often opting for weekly or bi-weekly payments. This effectively manages cash flow and minimises the risk of overspending.

While GIRO auto-deductions offer a convenient way to automate payments, some prefer manual payments via platforms like PayNow, AXS, or bank mobile applications for greater control and oversight. Both methods have their merits; GIRO provides consistency, while manual payments allow for immediate adjustments based on real-time financial situations.

To further enhance budgeting practices, consider setting up personalised payment reminders through your bank's mobile app or calendar. Employ budgeting applications to track expenditures and allocate funds effectively.

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Additionally, when receiving occasional windfalls, such as tax refunds or festive bonuses, allocate a portion directly towards your credit card balance to accelerate debt reduction.

Distributing your credit card payments into smaller, more frequent transactions can significantly reduce the psychological stress associated with large, end-of-month bills, often referred to as "bill shock". By making smaller payments throughout the month, you can see your balance decrease more often, providing a sense of control and progress.

In Singapore, platforms like PayNow, AXS, and various bank mobile applications make these manual payments incredibly convenient. This ease of access encourages more frequent payments, which can be particularly beneficial for managing Buy Now Pay Later (BNPL) services. Frequent payments help prevent significant debt accumulation by consistently reducing the outstanding balance, thus mitigating the risks associated with BNPL’s often short repayment periods.

In Singapore, your creditworthiness is evaluated by the Credit Bureau Singapore (CBS). 

A key factor in maintaining a strong credit profile is keeping a low credit utilisation ratio, which measures the amount of credit you're using relative to your total credit limit. 

Unlike some countries where frequent payments might be penalised or have complex reporting implications, Singapore's credit system encourages responsible credit management without penalising multiple payments within a billing cycle.

Making early payments on your credit card can positively influence your CBS report by demonstrating consistent and responsible credit behaviour. These payments reduce your outstanding balance, which in turn lowers your credit utilisation ratio. 

This proactive approach to credit management can significantly enhance your credit profile, making you a more attractive borrower to lenders in Singapore. It's a straightforward way to show that you are managing your credit responsibly and controlling your debt.

>> MORE: Check your credit score for free

Major banks like DBS, UOB, and OCBC have distinct late fee structures. For instance, DBS charges S$100 if the minimum payment isn’t received by the due date. Similarly, UOB and OCBC impose late fees when minimum payments are missed. To avoid these charges and the potential negative impact on your credit score, making payments before the due date is crucial.

Paying at least the minimum amount early in the billing cycle ensures you avoid late fees, and paying more later can further reduce your balance. Additionally, setting up auto-reminders through your bank’s mobile app or calendar can help you stay on top of your payment schedule.

This not only prevents late fees but also enables you to maintain a positive credit history, as late payments can be reported to the Credit Bureau Singapore (CBS).

Frequent credit card payments are particularly beneficial for those who regularly utilise a significant portion of their credit limit, such as business owners and frequent travellers in Singapore. By making payments more than once a month, you can effectively free up your credit limit, allowing you to make additional purchases when needed.

However, it's important to be aware that payment processing times can vary between banks. Consequently, the increase in your available credit may not be reflected immediately after making a payment. It's advisable to check with your specific bank regarding their processing times to avoid any potential issues.

Seeing your credit card balance decrease more frequently can boost motivation and encourage consistent debt management. To stay organised and track progress, consider using bank alerts for payment reminders, setting up GIRO for automated payments, and utilising budgeting apps to monitor your spending and manage your finances effectively.

If you consistently settle your credit card balance in full each month and don't anticipate needing to apply for additional credit soon, making multiple payments within a billing cycle provides little to no added benefit.

Credit card issuers typically offer an interest-free grace period for accounts paid in full, meaning you won't incur interest charges until the next due date. In such cases, you are essentially using your credit card as a convenient payment tool, capitalising on rewards and consumer protections while avoiding interest costs.

However, it's important to note that payment processing times can vary among banks. Therefore, overpaying or making multiple payments close to the statement closing date might not immediately reflect in your available credit or could potentially complicate the allocation of credit card rewards. In these scenarios, setting up automatic monthly payments via GIRO or your bank's online platform may be a more efficient and less time-consuming approach.

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